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When we hear people talking about investing in commodities, we instantly think gold, oil and metals. But have you ever heard anyone talking about investing in diamonds?
You probably haven’t’. And why not?
On paper, diamonds have the potential to be an excellent investment vehicle.
The diamond industry has a turnover of around $80 billion a year and they are becoming increasingly scarcer, which will push up demand as the years go by. As demand goes up, so will the price.
(Source: The Economist)
By 2050 it is estimated that there will be a demand deficit of around $40 billion.
The price of diamonds is also far less volatile than other asset classes, including gold and precious metals.
Yet, it is still not considered as a viable investment vehicle for the general public.
There are three main reasons why this might be the case:
- The industry is not transparent – Unless you are a diamond expert, it’s very difficult to know the true value of a particular diamond. Buying and selling diamonds at an accurate market value can, therefore, be extremely challenging if you are not part of a small percentage of “in-the-know” diamond traders.
- There’s no standardization – Gold, platinum, oil and most other commodities can be sold at a standard prize (i.e. per kg, ounce, liter, etc.) as it tends to be a uniform material. However, every single diamond is unique. One carat of diamond has a different value to the next carat. Different combinations of the “4 C’s” (clarity, cut, color, carat) will result in different values.
- Very illiquid market – It’s easy to find a jeweler and buy a diamond. But have you ever tried to sell a diamond? Not so easy. The market is heavily skewed in favor of retailers. It is almost impossible for consumers trying to sell a personal diamond, to find a suitable buyer at a fair price.
Conventional diamond exchanges are catered towards B2B trading with no use to individual traders. This will often force sellers to reduce their asking price by as much as 50% below the actual market value.
CEDEX provides an all-in-one platform solution
CEDEX is aiming to bridge the gap between the diamond industry and traditional financial markets through the first ever Blockchain-based diamond exchange.
The goal is to supply the necessary tools so anyone and everyone can invest and trade in diamonds like an expert.
In order to do this, the company had to come up with a unique, two-part solution:
- How to transform diamonds from one-of-a-kind stones to a standardized asset with a value that’s transparent and clearly defined; and
- A platform where these diamonds can be traded in an equal, two-sided market that will make it easier for diamond holders to liquidate their asset.
The end product is an innovative ecosystem with four distinct aspects that caters to both the demand side as well as the supply side.
Diamond Tokenization allows diamonds to be uploaded onto the Blockchain by tokenizing the underlying asset. The Diamond-Token represents ownership of the diamond and includes valuable information such as trading history and stone qualities.
The DEX is a unique algorithm that makes use of machine learning to analyze, rate and evaluate individual diamond data, including gemological information. The system takes the guesswork out of pricing by quantifying and ranking individual stones which enable everyone to trade in diamonds without having to worry about being scammed.
A Blockchain-based exchange connects owners with investors over a secure network which creates a more liquid, two-sided marketplace.
The CEDEX Coin is a cryptocurrency that functions on the CEDEX network and will be the only way of paying for fees, insurance, transportation and custodial services.
By bringing these four components together, CEDEX is able to solve the issue of transparency (DEX algorithm rates a diamond’s asking price), liquidity (exchange creates supply and demand) and standardization (CEDEX creates a benchmark for each diamond category so you can easily compare how your diamond rates to other diamonds in the same category).
How does it work?
This depends if you want to sell or invest.
If you are a private diamond holder you can leverage the value of your asset on the CEDEX platform. CEDEX has a simple onboarding process that uses the unique capabilities of Blockchain technology to create a smart contract. The smart contract represents the financial offering.
Financial offerings vary from single diamond trades, to shared investments (if the stone has a particularly high valuation), and diamond ETF’s (diamond basket sold to multiple investors).
If the smart contract (or financial offering) gets approved and executed, the diamond holder is issued with a Diamond-Token, while the actual diamond is sent to a custodian.
With the Diamond token, the holder can list it on the CEDEX Exchange or sell it directly, customer to customer.
If you are investing, you will use The DEX.
The DEX, through its proprietary algorithm, makes it straightforward for anyone (including individuals who knows absolutely nothing about the industry) to invest in diamonds.
By using global inventory data, diamond financial indices and gemological data, diamonds are listed on the CEDEX exchange in easy-to-follow ranks, categories and values which helps investors to confidently pick the diamond with the best value for money.
Once you’ve bought the diamond of your choice, you have the option to have the physical stone delivered to you. This will cause the corresponding Diamond-Token to be destroyed as the stone is now removed from the CEDEX network.
The CEDEX Coin
The CEDEX Coin is a cryptocurrency that will act as fuel to keep the CEDEX network running.
It’s an ERC20-token that runs on Ethereum’s public Blockchain.
In order for users to conduct any transaction on the CEDEX network, they will have to do so with the CEDEX Coin.
This includes purchasing diamonds and financial instruments backed by diamonds, payment to service providers, collateral to cover short-positions or to receive CEDEX Coin loans.
As more investors use the platform, the demand for CEDEX Coins will get bigger. The CEDEX network opens up the market to a much wider, global user base. The number of active users is therefore expected to grow very quickly over the first few years.
Loading up diamonds to an immutable Blockchain network and tokenizing it through the CEDEX Coin reduces costs associated with investing and trading, increases the security of diamond records and transactions, and significantly cuts down on the time it takes to execute trades.
The CEDEX Team
The success of Blockchain-based startups and ICO’s will often lie in the expertise of the overall management team.
CEDEX has a perfect blend of experience that compliments each aspect of the different components, such as diamond trade, financial services, online marketing and cryptocurrency knowledge, including Blockchain.
From a potential customer’s perspective, this instills confidence and peace of mind, knowing that the project is in expert hands.
Founder, Ronen Priewer, has knowledge of the diamond industry, gathered from over two decades of experience, while CEO and Co-Founder, Saar Levi, has more than fifteen years’ experience in global financial markets, including senior roles at Lehman Brothers and Barclays Capital.
The Blockchain expertise is provided by CTO, Avner Levinstien and Boaz Hilel (Global Business Development). Boaz has also been involved with cryptocurrencies since 2012.
Marketing is taken care of by Gadi Hayat, who has over 20 years of industry experience, and Yael Eckstein, who was recognized as a winner of the national L’Oréal award for a new product launch.
In addition, CEDEX has various team members that bring with them multiple years of financial industry experience in some shape or form, including Calvin Hau (Asia Business Development), Shigeo Akiyama (Business Development Japan), Ben Rosanes (Customer Relations Manager) and Aviv Balassiano (Development Manager).
These are just some of the permanent team members without even looking at the accomplished board of advisors.
However, what is evident from the above is that if success depends solely on experience, the CEDEX project has already achieved its goal.
CEDEX will launch its ICO (starting with a pre-sale) on the 12th of January 2018 where a maximum of 100 million CEDEX Coins will be distributed (only 50 million will be offered to the public, the other half will go towards pre-sale bonuses and management).
The value of CEDEX coins at the point of sale will equate to 500 CEDEX Coins = 1 ETH.
Around 85% of the proceeds will go towards further development of the CEDEX platform, including regulatory and licensing requirements.
The rest of the funds will be used to buy diamonds for the CEDEX network to get the diamond exchange up and running.
CEDEX offers a unique solution that leverages the benefits of Blockchain technology to open up the diamond market to everyday investors.
It further helps to liquidate an otherwise highly illiquid asset by connecting investors and sellers through a secure and simple-to-use, diamond exchange.
By combining these two overarching goals, CEDEX hopes to push the diamond investment market to a potential $350 billion annually.